Partners HealthCare looks to add hospitals in Medford, Melrose

Partners HealthCare System unveiled a regional strategy Wednesday for expanding medical services on the North Shore, acknowledging for the first time it has signed an agreement to acquire the Hallmark Health hospitals in Medford and Melrose.

Under the plan, which needs state and federal approval, Boston-based Partners would absorb Melrose-Wakefield Hospital and Lawrence Memorial Hospital in Medford. It would convert Lawrence Memorial from an acute care hospital with 134 beds to a short-stay hospital with 20 to 40 beds, while renovating the 234-bed Melrose-Wakefield Hospital.

At the North Shore Medical Center in Salem, which Partners already owns, its Union Hospital in Lynn would become a primary care and behavioral health facility and 72 of the 83 medical surgical beds would be moved to the medical center’s 273-bed Salem Hospital.

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“This is all about how we coordinate care, putting the right care in the right place while emphasizing our commitment to community needs,” Partners chief executive Gary L. Gottlieb said in an interview.

Gottlieb said Partners plans to spend $300 million at the Hallmark hospitals, $190 million at Salem Hospital, and $30 million to $40 million at Union Hospital to expand primary care and community health and upgrade facilities and information technology. The moves are expected to reduce Partners’s total medical expenses by $300 million over five years, he said.

Partners outlined its North Shore strategy as the organization awaits the conclusion of a four-year investigation by the US Department of Justice and state Attorney General Martha Coakley’s office into its alleged anticompetitive behavior. That inquiry is focusing partly on whether Partners, the state’s largest hospital and physicians organization, should be allowed to move forward with its agreement to acquire South Shore Hospital in Weymouth.

Gottlieb said he decided to detail Partners’s plans for the North Shore now, despite the pending antitrust decision, because “we wanted to share our story with the community.” He said state and federal investigators “have known all along that we’ve been in discussions with Hallmark and we’ve kept them abreast on our discussions.”

The move to expand psychiatric and substance abuse services in Lynn comes at a time when other health care providers have been cutting back on such operations, which often lose money. That could help Partners overcome resistance from regulators concerned with its market clout and ability to command insurance payments that are among the highest in Massachusetts.

Top executives at Hallmark and North Shore Medical said they will work to address community concerns about the plans, particularly the changes at Lawrence Memorial and Union hospitals, which have begun to leak out in the past few months and have been discussed by state and municipal lawmakers recently in Medford and Lynn.

“We see this as a tremendous opportunity to link in with a larger, broader delivery network,” said Hallmark president Michael V. Sack, noting Hallmark directors concluded two years ago that they needed to strengthen their hospitals and consider expanding an 18-year clinical affiliation with Partners and its Massachusetts General Hospital in Boston.

“It’s a natural progression for us,” he said. But Sack added that, among local officials, “there’s a natural hesitation and level of curiosity—what’s going on, what’s happening?’’ Despite those concerns, he said, “We haven’t closed Lawrence Memorial in 10 years, and it’s not going to close.”

Similarly, North Shore Medical president Robert Norton, said, “There will be some worries on the part of people in Lynn. We’re trying to address them.”

Norton said the regional strategy grew out of Partners' evolving “population health management” model, which seeks to better coordinate care, provide more routine services at community hospitals rather than in Boston, and keep more patients out of the hospital.

“This is a well-thought out strategy,” said Marc Bard, co-director of the Tufts Health Care Institute, a Boston educational group that helps doctors and hospitals improve the way care is delivered. “Not everyone’s going to agree with this strategy. But while most consolidation that’s occurring around the country is to cover a geography or to get scale, this is a play to meet the needs of the community and to better position the Partners system at the same time.”

Gottlieb said Partners executives planned to formally notify regulators of its plans in the coming days. They include the Justice Department and the state Attorney General’s office, which monitor antitrust issues; the state Department of Public Health, which issues hospital licenses; and, the state’s new Health Policy Commission, which works to reduce health costs.